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IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI
. , ,
BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM
./I.T.A. Nos. 1248/Mum/2009 & 3788/Mum/2012
( / Assessment Year: 2005-06)
Vivek M. Mangla ITO, Ward 3(4),
Prop. Hotel Maharaja, Thane
35, Deepak Society, Dr. Moose Road, /
Opp. Naukavihar, Talavpali, Vs.
Thane (W), Mumbai-400 602
. / . /PAN/GIR No. AAXPM 1937 F
( /Appellant) : ( / Respondent)
/ Appellant by : Shri N. M. Porwal
/Respondent by : Shri Neeraja Pradhan
/ : 10.04.2014
Date of Hearing
/
: 20.06.2014
Date of Pronouncement
/ O R D E R
Per Sanjay Arora, A. M.:
This is a set of two Appeals by the Assessee directed against the separate Orders
by the Commissioner of Income Tax (Appeals)-I, Mumbai (`CIT(A)' for short),
dismissing the assessee's appeal contesting its assessment u/s.143(3) of the Income Tax
Act, 1961 (`the Act' hereinafter) for the assessment year (A.Y.) 2005-06 vide order dated
20.12.2007 and the levy of penalty u/s.271(1)(c) consequent thereto vide order dated
25.03.2010.
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ITA Nos.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06)
Vivek M. Mangla vs.ITO
ITA No. 1248/Mum/2009
2. The issue arising in the quantum proceedings is the maintainability in law of the
invocating section 68 of the Act in the facts and circumstances of the case.
3.1 The law in the matter is well settled, so that a cash credit appearing in the
assessee's books of account has to be proved as to its nature and source, failing which,
section 68, which is a rule of evidence, deeming the amount credited as the assessee's
unexplained income for the relevant year, may stand attracted. Further, that the burden of
proof has to be discharged on the parameters of identity and creditworthiness of the
creditor, and the genuineness of the credit transaction. The issue is thus primarily factual,
so that it is required to be determined in each case whether the burden of proof stands
discharged by the assessee in the facts and circumstances of the case, which would be
qua each credit.
3.2 It shall be relevant to recount the background facts of the case, credit-wise, as
gathered from the assessment order. The assessee, an individual, resident of Thane,
Maharashtra, received gifts for an aggregate of Rs.42.01 lacs during the relevant year
from several (nine) persons, as under:
Sr. No. Name of Person/donor Amount of Gift
(in Rs.)
1. Mohanshyam Mangala (HUF) 3,00,000
2. Anita M. Mangla 1,00,000
3. Jyoti P. Nairi, Santacruz, Mumbai 3,00,000
4. Ram Lakhan Singh, Bhandup 3,50,000
5. Chetan M. Morjaria, Uganda 8,00,000
6. Pawan Churiwala, Dubai (UAE) 7,51,000
7. Ramesh Verma, Mumbai 6,00,000
8. Vijay Verma, Mumbai 3,00,000
9. Gopal Verma, Mumbai 7,00,000
Total 42,01,000
The same were subject to test on the parameters of identity and creditworthiness (of the
donors) and genuineness (of the credit transactions) in the verification proceedings
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ITA Nos.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06)
Vivek M. Mangla vs.ITO
initiated by issue and service of notice u/s.143(2). The gifts having been treated as
genuine in the case of first two donors (of the Mangla family), we delineate the facts as
recorded by the Assessing Officer (A.O.) only for the balance gifts aggregating to
Rs.38.01 lacs from the remaining seven (7) creditors, as under:
i) Jyoti P. Nairi, Mumbai (Rs.3 lacs):
The gift was acknowledged. However, apart from ascribing the source of the gift
to the repayment of loan to one, M/s. Cargo Vision Sea Freight (I) Pvt. Ltd., nothing
worth mention was adduced by the assessee. The basis of the gift is stated as `love and
affection', while no relationship with the donee or even occasion for the gift had been
stated, much less established. The gift was accordingly treated as non-genuine.
ii) Ramlakhan Parasnath Singh, Mumbai (Rs.3.50 lacs):
Though the gift was acknowledged, the source of the money gifted was stated to
be the commuted value of the pension and gratuity received by the donor at a total of
Rs.3.70 lacs upon retirement as Principal of a School. The bank balance on the receipt of
the retirement benefit stood at Rs.3.72 lacs. The bank balance with the donor left after
making the gift (for which no ostensible reason had been cited) was only at Rs.22,521/-.
It was extremely odd that any person would gift - and almost the whole ­ of his life-time
savings or of years of toil to anyone, much less a stranger, and that too in the evening of
his life, when his capacity for generating the income stands substantially reduced. No
relationship or occasion for the gift stands specified. The gift was, accordingly, treated as
not genuine.
iii) Chetan Purushottam Morjaria, Uganda (Rs.8 lacs) :
The gift, the source of which is a foreign remittance from abroad in the local
(Mumbai) bank account of the NRI donor (at Rs.8 lacs), stands acknowledged. No basis
for the gift has however been stated in-as-much as no relationship with the assessee or
occasion for the gift thereto in no unsubstantial sum has been specified. The gift was
accordingly treated as not genuine.
iv) Pawan Banwarilal Churiwala, UAE (Rs.7.51 lacs):
The gift, the source of which is foreign remittance from abroad in the local
(Mumbai) bank account of the NRI donor by way of telegraphic transfer by `Asia
Exchange' for Rs.8.78 lacs, stands acknowledged. There was almost nil balance in
account prior to the remittance, received thus for the purpose of making the gift. No
evidence, other than stating of good relationship (with the assessee), has been specified
by the donor in justification of the gift. The gift was, accordingly, treated as non-genuine.
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ITA Nos.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06)
Vivek M. Mangla vs.ITO
v to vii) Ramesh Verma (Rs.6 lacs) / Vijay Verma (Rs.3 lacs) / Gopal Verma (Rs.7
lacs), Mumbai
The facts characterizing these gifts by three members of a family being almost
identical, the same are taken together to avoid repetition. The gifts stand acknowledged.
The perusal of the respective bank accounts all with the same bank branch, of the donors,
as furnished by the assessee ­ the donors failing to respond to the summons issued by the
A.O., revealed them to be enjoying credit facility from the bank, ostensibly for the
business purposes, and the gift amount being out of the said borrowing. No relationship
with the donors for the gifts or occasion therefor stands specified. The gifts were
accordingly treated as not genuine.
The assessee was unable to improve its case ­ the gifts having been treated as the
assessee's unexplained income u/s.68 in assessment, stood made in the appellate
proceedings, even as he relied on the decision in the case of Krishnakumar K. Ashar vs.
ACIT (in ITA No.9355/Mum/2004 dated 21.02.2008/PB pgs. 87-94). No convincing
reason/s had been given for making the gift/s. Why would anyone gift his hard earned
money, which in one case represents retirement funds and in three cases borrowed funds,
to any other for no ostensible reason. In fact, no relationship with the donor had been
specified, much less proved, so that it becomes a case of gift/s to a stranger, while the
same (relationship) and a personal bond between the donor and donee is the prime mover
of a gift. The same, therefore, fails on the test of human probability. The genuineness of
the gift cannot be determined without looking into the conspectus of the facts and
circumstances of the case, including the surrounding circumstances. The addition was
accordingly confirmed, placing reliance, besides on CIT vs. P. Mohanakala [2007] 291
ITR 278 (SC), decisions in the case of Gurbachan Singh Jaggi vs. CIT 165 Taxmann 505
(P&H) and ITO vs. Navin Kumar Agarwal (in ITA No.3312/Del/2004 dated 18.07.2008),
also reproducing there-from. Aggrieved, the assessee is in second appeal.
4. Before us, while the assessee reiterated its stand, stating of the gifts having been
confirmed and, further, made through banking channel, with the documents establishing
the identity and capacity of the creditor being not rebutted, the ld. DR relied on the orders
by the authorities below, placed reliance on the decisions in the case of CIT vs. Vinod
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ITA Nos.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06)
Vivek M. Mangla vs.ITO
Chugh [2012] 204 Taxman 89 (P & H)(Mag.)/ [2011] 15 taxmann.com 343 (P & H);
Arvind Kumar Mohnani vs. ITO [2011] 129 ITD 117 (Jab)(TM) and ITO vs. Mukesh
Bhanubhai Shah [2009] 29 SOT 464 (Mum).
5. We have heard the parties, and perused the material on record, giving our careful
consideration to the matter.
5.1 To begin with, we may emphasize that though the onus to prove the credit on the
parameters afore-stated (refer para 3.1 above) is on the assessee, the discharge or not so
thereof in the facts and circumstances of the case is largely a matter and, consequently,
subject to a finding, of fact. The same, as well as the burden of proof itself, would thus
vary with the facts and circumstances of each case. The whole premise of the provision
(s. 68), it needs to be appreciated, is a satisfactory explanation, i.e., as appeals to a
reasonable, prudent person, and which stands clarified by the apex court in P.
Mohanakala (supra) to mean a proper, reasonable and acceptable explanation. In case of
a gift, we may though mention that the burden of proof, and particularly from the stand-
point of the genuineness, is all the more in-as-much as the donor, without any
consideration, except ostensibly emotional satisfaction, relinquishes his entire rights in
the property being gifted forever, so that the test of human probabilities assumes critical
significance (refer: Sumati Dayal [1995] 214 ITR 801 (SC)). The Courts have
discountenanced and, in fact, come down heavily on the practice and phenomenon of
`gifts', observed only in the files of the income-tax payers, in complete contradistinction
to the experience of every day real life where gifts, even from near and dear ones, are
hard to come by, and can be regarded as only rare and exceptional, moved and
occasioned by (say) compelling circumstances, as for example a dire need, a medical
emergency/bill, etc. of the donee or his/her family, of the case. We are reminded of the
famous observations by the hon'ble Madras high court in Addl. CIT vs. C.R.
Ranganathan Chetty [1985] 153 ITR 456 (Mad) (at pg. 466)), even as many such abound
the judicial pronouncements and annals, which we quote as under:
`Look at the way the gifts were made. Not only were they made to other
people's children, but some of them were made to other people's wives. In
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ITA Nos.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06)
Vivek M. Mangla vs.ITO
any place, excepting in a tax Court, gifts to other people's wives even if
they are wives of co-partners, would raise a host of questions and not a few
eye-brows, excepting when there is an understanding nod, 'Ah, it is all for
purposes of income-tax'. The ITO saw the facts with a layman's eyes, which
was the correct way to look at them. The Tribunal for their part, however,
got involved in the convolutions of the Mitakshara law of gifts and brought
to bear a dry and unreal legalistic approach to the application of section 64,
which the provision does not call for, if we understand CM. Kothari's case
(supra) aright.'
The tribunal in Arvind Kumar Mohnani (supra) and Ishrawati Devi vs. ITO [2008] 298
ITR (AT) 313 (All.) has discussed this issue comprehensively, issuing guidelines for
ascertaining the genuineness of a gift, covering various facets of the matter, after an
extensive review of the case law on the subject. The decisions relied upon by the tribunal
in Krishnakumar K. Ashar (supra), relied upon by the assessee, stand also discussed by
the tribunal in these cases, opining, in sum, that all the facts and circumstances having a
bearing in the matter would need to be taken into account and, therefore, a decision has to
be taken on a conspectus thereof. We may again reiterate that the decision qua the
validity of the satisfaction or otherwise of the A.O. with the assessee's explanation, on
which the invocation of section 68 essentially hinges, is principally a matter of fact.
5.2 Examining the facts of the case, we find the assessee's case as totally unproved.
The only `reason' advanced by the assessee for the gifts is that he being a young man of
28 years, on the threshold of his career as a real estate developer, was helped with these
funds. True, it could be, but only from very close and near and dear ones who would
completely identify themselves with the assessee and his success. Surely, a gift under
these circumstances would not be made to a strangers or relative stranger or perhaps even
acquaintance but only to one with whom the donor enjoys a high level of personal
relationship and emotional bonding. No relationship, however, has been specified in the
instant case for any donor. How the donor/s knows the assessee or his family? How and
under what circumstances such close ties, so as to identify with the assessee (or his
family) came to be developed? Have the donor/s gifted any sum to the assessee (or his
family members) at any time in the past, which would generally start with small sums?
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ITA Nos.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06)
Vivek M. Mangla vs.ITO
Whether any gift has been similarly made to the assessee (or his family members) any
time in future? Have the assessee (or even his family members) at any time gifted to the
donors (or their families); love and affection being almost certainly a two-way process?
Have, in fact, the donor/s gifted like amount to anyone in their own families? These and
such like questions, answers to which would form the crux of the assessee's explanation
in-as-much as it is the genuineness of the gift that has been doubted, remain completely
unaddressed and unanswered. Rather, they even do not stand to be posed in-as-much as
there is no whisper of any personal relationship or the basis of `love and affection' and
`good relations' cited in justification or as the reason for the gift/s. Then, again, what is
the financial standing of the donor/s, i.e., quite apart from their relationship, if any, with
the assessee. The same has nowhere been demonstrated. The value of the money, like any
other material thing in life, is relative. Rs.1 lac, for example, would carry significant
value for the same by different person, assuming a capital base of Rs.5 lacs; Rs.10 lacs;
Rs.100 lacs; Rs.1000 lacs, and so on. In almost all the cases, the bank accounts reveal no
significant sums, with the money gifted arriving in and exiting the bank account through
which the gift is being routed. In fact, even the immediate source of the funds with the
donors has not been explained, except in the case of Ram Lakhan Singh, Mumbai, in
which case the same, i.e., the retirement funds, in almost their totality, disprove the
assessee's case rather than establishing the creditworthiness. Further, for the three
members of the Verma family, the amount gifted, as apparent from the bank accounts
furnished, are sourced from loan funds. Apart from the legal issue of whether the same
would qualify as a gift, which could only be of one's own property, i.e., over which one
has absolute rights, including of disposition, as well as the proprietary issue in-as-much
as the bank had advanced funds only for business purposes, it raises serious doubts qua
the genuineness of the gifts, besides in no manner establishing the credit-worthiness of
the donors, if not actually disproving it.
5.3 We are, for the reasons afore-stated, in complete agreement with the findings by
the Revenue cited (supra) (para 3.2), and endorse and uphold the Revenue's action in
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ITA Nos.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06)
Vivek M. Mangla vs.ITO
considering the impugned credits, claimed to be gifts, as unproved on the anvil of section
68 of the Act and, accordingly deemed as the assessee's income there-under. We decide
accordingly.
ITA No. 3788/Mum/2012
6. In the penalty proceeding, the assessee's case was principally on the ground that
an incorrect claim does not by itself amount to furnishing inaccurate particulars of
income, so as to qualify for the levy of penalty u/s.271(1)(c). The same stood levied and
sustained on the basis that the gifts under reference were totally unproved. Aggrieved, the
assessee is in second appeal.
7. We have heard the parties, and perused the material on record. Without doubt, the
penalty for concealment, or furnishing inaccurate, particulars of income, is not automatic
and it is open for the assessee to, despite an addition to its returned income in assessment,
make out a case for non-levy of penalty u/s.271(1)(c) by furnishing a plausible
explanation, eschewing the application of Explanation 1 to section 271(1)(c), which
deems the concealment and/or furnishing inaccurate particulars of income in the absence
of any explanation, or the explanation being found as false, or being unsubstantiated. The
assessee, however, has not furnished any explanation, i.e., which could be regarded as
proper or acceptable, from the standpoint of a layman or a reasonable person. The
findings with regard to the capacity (of the donors) or the genuineness (of the gifts) being
not proved are essentially findings of fact, arrived at in assessment on a consideration of
the facts and circumstances of the case and, therefore, have persuasive value in the
penalty proceedings as well. No improvement to its case, however, stood made by the
assessee at, in fact, any stage of the penalty proceedings, including before us. That an
incorrect claim does not by itself amount to furnishing inaccurate particulars of income is
not a statement of fact, but of law, and we are unable to appreciate its import in the facts
and circumstances of the case ­ the explanation u/s.68 being primarily a matter of fact.
No immediate source of gift, except in one case for gift of Rs.3.50 lacs (by Shri
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ITA Nos.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06)
Vivek M. Mangla vs.ITO
Ramlakhan Singh) has been clarified, much less established, so that the capacity is not
proved. In fact, barring one case, there is almost no balance in the account both prior to
and after the gift, which is thus used as a conduit for making the gift, while in three cases
(for gifts for Rs.16 lacs), the gifts are made out of borrowed funds, in either case,
disproving capacity. In the sole exception of the source being clarified, the gift was made
out of retirement funds, and which, in the absence of any relationship with the donee or
other reasons for making the gift, operates to discredit the assessee's case of having
received a valid, genuine gift. The genuineness of the gifts, again, remain completely
unproved in the absence of any personal relationship being claimed, much less proved.
As it would appear to us, the credits only represent laundering of his money by the
assessee, masqueraded as gifts. The receipt by the assessee, it needs to be appreciated, as
clarified by the apex court time and again (refer, inter alia, P. Mohanakala (supra) and
Sumati Dayal (supra)), is itself an evidence of receipt of income, so that where not
explained satisfactorily as to its nature and source, the said evidence remains unrebutted,
and is accordingly liable to be regarded as the assessee's income. The statutory
presumption u/s. 68 is that the receipt is of income nature. It is also trite that no exception
is forthcoming on the basis that the income, so brought to tax, is deemed as the assessee's
income; section 68 being in fact only a rule of evidence, following the general principles
of common law jurisprudence. We accordingly confirm the levy of penalty, which is at
100% of the tax sought to be evaded, finding no infirmity, legal or factual, therein. We
decide accordingly.
8. In the result, the assessee's appeals are dismissed.
Order pronounced in the open court on June 20, 2014
Sd/- Sd/-
(D. Manmohan) (Sanjay Arora)
/ Vice President / Accountant Member
Mumbai; Dated : 20.06.2014
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ITA Nos.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06)
Vivek M. Mangla vs.ITO
. ../Roshani, Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent
3. () / The CIT(A)
4. / CIT - concerned
5. , , / DR, ITAT, Mumbai
6. / Guard File
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai